There’s no military strength without economic strength. Since governments produce nothing, their capacity to fund militaries a little or a lot is an effect of taxable access to prosperity.
It’s worth remembering as Mohamed El-Erian writes at the New York Times that the central planning recently espoused by Treasury Secretary Scott Bessent very much resembles what El-Erian preaches to his paper-chasing flock at Wharton.
In El-Erian’s accounting of Bessent’s June 23 speech at the New York Economic Club, he cheered the Secretary’s assertion that “considerations of national security, domestic politics and geopolitics no longer play second fiddle to traditional business interests in determining corporate and economic outcomes.” Pity El-Erian, he took Bessent literally.
El-Erian ignores that Bessent is serving a President in Donald Trump who deeply believes in industrial policy. But does Bessent believe his June 23 speech? The speculation here is no in consideration of Bessent’s past work as an instructor on economic history.
Which means El-Erian’s beliefs can be addressed on their own. He believes national security must trump business interests in the future. Translated, globalization of production must take a backseat to domestic production with “brittle” supply chains top of mind. No, that’s not serious.
Let’s start with the obvious. If Gucci were a country, would it ever aim to war with Beverly Hills? It's a clown question. Which is why trade, though not 100% foolproof as a way to avoid war, is at the very least an ideal way to reduce the odds of war by making it frightfully expensive.
From there, let’s tack to another obvious: the last thing a nation with warring aims toward another country would ever do is to trade with that country. That’s because trade strengthens us, always and everywhere. See Henry Ford’s factories to grasp what’s true. The more that production was divided among men, the faster and better that cars were made. What was true inside factories is no less true when work is divided up among men and women in different countries.
Next, no nation with warring intentions would care about the protectionist policies of the enemy. They would secretly cheer it, simply because a failure to divide up work with the world will weaken them economically to the detriment of their military. That’s why El-Erian’s proclamation that “Trade and investment openness must be strictly reciprocated” is so unserious. If China or other theoretical national security threats want to weaken themselves with trade barriers, let them.
El-Erian adds that “national economic capacity is critical to economic security.” Quite the opposite. See OPEC in 1973. While Arab members of the cartel embargoed the U.S., they knew it was wholly symbolic. “Arab oil” would continue to flow into the U.S. to the secret delight of the Arab nations who simply couldn’t afford to forego the world’s biggest market for oil, and couldn’t do so with national security top of mind.
Economically thriving nations have an enhanced incentive to avoid war to begin with precisely because the costs are so great. This is worth keeping in mind as El-Erian rolls out myriad platitudes about the looming “transition from an era driven by economic efficiency to one defined by geoeconomics and economic statecraft.” Talk about a way for the U.S. to weaken itself militarily by substituting “experts” like El-Erian for the markets themselves.
Say it again that without “traditional business interests” disdained by El-Erian, there is no national security. In which case Bessent’s June 23 speech rates El-Erian’s ire instead of his praise: thanks to Bessent’s speech, we now further know what's true about El-Erian: he's a scholar who is rather bereft of insight.
